Airbnb Yield

Discussion in 'Investment Strategy' started by TypingDog, 8th Feb, 2020.

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  1. TypingDog

    TypingDog Member

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    Hi,


    I'm a newbie to this forum, so if this is in the wrong place just shoot me a DM and I'll remove the post.


    I've been scouring different options to maximize yield and have come across Airbnb as potentially optimal.

    After taking into account a higher vacancy rate and cleaning costs, the yield works out to be ~8% (across a few properties in Melbourne). This beats almost any residential property in Melbourne, what am I missing? Higher insurance costs?


    Thanks in advance for any responses.


    Kind regards,

    Typing Dog.
     
  2. thatbum

    thatbum Well-Known Member

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    Extra work, costs, legal issues, management logistics, required furnishings, insurance? Also the fact that it doesn't really work that well for the average rental?

    Lots of things to think about imo - its certainly not automatically better than long term letting.
     
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  3. Perthguy

    Perthguy Well-Known Member

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    You need to find out if you are actually permitted to run an airbnb. A lot of strata complexes do not allow it and some councils have rules you must follow.

    Also factor set up costs. Mine cost more than $30k to set up even with second hand furniture from gumtree. Ongoing costs are quite high, for example my most recent power bill was $566. Ouch!
     
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  4. Beano

    Beano Well-Known Member

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    Over what period and how many units did select to calculate 8% ?
    Was this gross or net ?
    Did it allow capX or depreciation of the appliances/furnishing?
     
  5. moridog

    moridog Well-Known Member

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    It can cost surprisingly little to furnish an Airbnb as “stuff” has never been cheaper, I guess it depends on your target market. Ours cost about 5 k to set up. Ours is targeted at families. I don’t know what the percentage profit is but for us, it easily outstrips rental BUT it’s a lot of work and some anxiety. I recently discussed outsourcing management but they took 25% which although perfectly legit, would make it not viable for us.
     
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  6. Beano

    Beano Well-Known Member

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    You do have to take into account your time , your time is valuable.
    Would it be 20% net cap rate ?
    Less the 25% management so about 12% cap rate ?
     
  7. Luthor Australia

    Luthor Australia Active Member

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    I have been running a short term rental via airbnb in a cbd apartment for 6 years now. Each year bring in approx $55k gross. Apartment purchase price was $350,000 plus 5% buying costs plus $7k worth of furniture.

    Have engaged an independent cleaner to service the apartment and greet guests for me. Costs me $70 a pop out of which $60 is paid by the guest (cleaning fee). I spend approx 20minutes a week dealing with guests via the app.

    Apartments of this caliber would usually get $450 a week normal rent, or $23,200 per year minus agents fees.

    All up a worth while exercise for me and feels quite safe as I generally know exactly what’s coming booking wise for at least 6-7months ahead (I have a strict cancellation policy). Currently booked out solid until August, with some bookings locked in as far ahead as March 2021.

    Yes all income is declared as are all expenses, including depreciation, which really makes a huge difference.

    Best part for me is that I have complete access to the apartment if I need to have it available for friends of family (minus small cancellation fee) where as I wouldn’t have been able to do this under a normal resi lease.

    Worst part - when I apply for any type of finance, the banks count all of my expenses on this property but NOT the income. None of it, not even a percentage. So it is a double hit to serviceability. Lucky for me it is one of many properties I hold (with regular rent) so I don’t feel it as much. Would really hurt if it was the only one.

    Apart from that, very positive in many ways
     
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  8. TypingDog

    TypingDog Member

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    Oh, that's definitely something I haven't had a look at. Thanks for the heads up.
     
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  9. TypingDog

    TypingDog Member

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    8% annually using the past three years. I took a sample of 4 properties.

    Net.

    I have not considered any capital expenditures or depreciation, time to redo the numbers. :))
     
  10. Beano

    Beano Well-Known Member

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    Does it include management fee or do you do it yourself ?
     
  11. TypingDog

    TypingDog Member

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    All by myself, haven't considered wages though.
     
  12. Beano

    Beano Well-Known Member

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    When you are free calculate your time at "market" .
    Keen to see what the "genuine" net yield is.